Q3 Report 2010 Johan Molin 1 Financial highlights Q3 2010 Strong - - PDF document

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Q3 Report 2010

Johan Molin President & CEO

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Financial highlights Q3 2010

Strong quarter in all parts

– Very solid development (+ 26% ) for Global Technologies – Continued strong growth in APAC and South America – EMEA and Americas bottomed and growing – Margin expansion in all divisions – Bid for ActivIdentity and stake in Agta Record

Sales 9 ,4 7 4 MSEK + 1 3 %

+ 6% organic, + 10% acquired growth, -3% currency

EBI T 1 ,6 3 0 MSEK + 2 1 %

Currency effect -28 MSEK

EPS 2 .9 3 SEK + 2 4 %

Reduced tax rate & depreciation of earn out

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Financial highlights Jan-Sep 2010

Resum ed organic grow th and strong profit developm ent Sales 2 7 ,1 7 5 MSEK + 4 %

2% organic, + 7% acquired growth, -5% currency

EBI T 4 ,4 4 0 MSEK + 1 1 %

Currency effect -191 MSEK

EPS 8 .0 3 SEK + 1 8 %

Reduced interest and tax rate

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Market highlights

Good growth of electromechanical locks in all parts Strong customer interest for Cliq Remote WiFi locks increasingly popular in the USA Residential digital door locks introduced in Australia Secure delivery infrastructure introduced in October

W iFi Residential DDL Australia Electric strike

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Secure delivery infrastructure

Launched October 2010

Secure encrypted delivery of digital keys

– Smart cards – Mobile phones - NFC – ID and banking cards

Online card security management

– Card personalization service – Cradle to grave

Secure issuance

– Online HDP & DTC printers Secure vault

TCP/ IP Ethernet

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Group sales in local currencies Jan-Sep 2010

2 + 3 0 3 3

• 2

4 3 + 7 1 4 + 6 4 6 + 8 2

• 4

Share of Group sales 2 0 1 0 YTD, % Year-to-date vs previous year, %

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21 000 22 000 23 000 24 000 25 000 26 000 27 000 28 000 29 000 30 000 31 000 32 000 33 000 34 000 35 000 36 000 37 000 38 000 39 000 2004 2005 2006 2007 2008 2009 2010 Sales, MSEK

• 14
• 12
• 10
• 8
• 6
• 4
• 2

2 4 6 8 10 12 14

Grow th % Organic Growth Acquired Growth Sales in Fixed Currencies

Sales growth Q3 2010 - Currency adjusted

2 0 1 0 Q3 + 1 6 % Organic + 6 % Acquired + 1 0 %

• 2 % from 2 0 0 8 peak

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Operating income (EBIT), MSEK

600 700 800 900 1 000 1 100 1 200 1 300 1 400 1 500 1 600 1 700 2005 2006 2007 2008 2009 2010 3 800 4 000 4 200 4 400 4 600 4 800 5 000 5 200 5 400 5 600 5 800 6 000 Quarter Rolling 12-months

Quarter 12-months

Run rate 5 ,8 3 8 MSEK ( 5 ,4 8 4 ) , + 6 %

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Operating margin (EBIT), %

12,0 13,0 14,0 15,0 16,0 17,0 2005 2006 2007 2008 2009 2010 EBI T % Quarter Rolling 12-months Long Term Target

Run rate 2 0 1 0 1 6 .3 % ( 1 5 .5 )

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Manufacturing footprint

Conversion to assembly or closures in high cost countries

– 37 factories closed to date, 14 to go – 34 factories converted to assembly, 19 to go – 19 offices closed, 6 to go

Consolidation of core production to China and Eastern Europe Personnel reduction 5,179p, + 16% to plan 1,236 more to go 1,106 MSEK remains at the end of the third quarter for all three programs

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Margin highlights Q3 2010

EBI T m argin 1 7 .2 % ( 1 6 .0 )

• Volume increase of 5% , Price 1%
• No acquisition dilution
• Negative mix effect due to growth in emerging markets -0.2%

+ Manufacturing footprint gives good contribution + S, G & A cost declining, 23.4% (24.1)

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Acquisitions 2010

• Fully active on acquisitions

– Growing pipeline with target 5% growth

• 1 1 acquisitions com pleted

in 2 0 1 0 Annualized 2 3 0 0 MSEK, + 7 % New acquisitions Q3

ActivI dentity 4 0 0 MSEK, public offer 3 3 % stake in Agta Record

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ActivIdentity, USA

Strengthens HID’s offering in logical access Products centered around establishing a persons identity when interacting digitally Strong authentication and card management systems 2,500 customers worldwide, 38% software 220 employees and 400 MSEK Slightly dilutive 2011

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Agta Record, Switzerland

Same business model as AA Entrance System with end-user focus and service Reinforces leadership in door automatics Very complementary with main strength in France and CH Good synergies within sales, service, products and infrastructure HQ in Switzerland 1,700 employees and 2,000 MSEK sales Ambition to acquire over time

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Division - EMEA

• Slow recovery in all parts
• Weak quarter in Eastern Europe, France, Denmark

and the Netherlands

• Good growth in Finland, Germany, Italy and Spain
• Good effect from manufacturing footprint
• Strong efficiency gain from seamless flow
• Operating margin (EBIT)

+ Volume 1% + Good response to new products + Strong efficiency gains

• Raw materials increasing

SALES share of Group total %

34

EBIT %

13 14 15 16 17 18

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Division - Americas

• South America, Mexico and Canada in good

growth

• Electromechanics developing well
• Residential growing for first time since H1 2008
• Security doors continued to decline
• Strong EBIT performance in all parts
• Operating margin (EBIT)

+ Volume + 2% + Strong efficiency improvement

• Raw materials increasing

SALES share of Group total %

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EBIT %

17 18 19 20 21

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Division - Asia Pacific

• China sales strong on the back of 3rd tier cities
• Korean market continued well
• South Asia and especially India is strong
• Good growth and solid profit in the Pacific
• Good efficiency development
• Operating margin (EBIT)

+ Volume + 15% + Currency effects

• Raw materials increasing

SALES share of Group total %

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EBIT %

6 8 10 12 14 16

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Division - Global Technologies

• Fantastic evolution in HID

– Access control growing in all parts of the world – Secure issuance benefitting from new printers – Identification solutions in strong demand

• Hospitality, first quarter of growth since 2008

– Renovation market is back – New RFID systems increasingly popular – Savings and move to China supports profit

• Operating margin (EBIT)

+ Volume + 26% + All business units doing well

SALES share of Group total %

13

EBIT %

12 13 14 15 16 17 18 19

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Division - Entrance Systems

• Quotation levels and orders are slightly growing
• Service and service contracts growing
• Retail coming back, health care weak
• Ditec sales stabilised but dilutive by 1.0%
• Operating margin (EBIT)
• Volume -1%

+ Efficiency gains

SALES share of Group total %

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EBIT %

12 13 14 15 16 17 18

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Q3 Report 2010

Tomas Eliasson CFO

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Financial highlights Q3 2010

MSEK 2009 2010 Change 2009 2010 Change

Sales 8,405 9,474 +13% 26,163 27,175 +4%

Whereof Organic growth +6% +2% Acquired growth +10% +7% FX-differences

• 216
• 3%
• 1,240
• 5%

Operating income (EBIT) 1,346 1,630 +21% 4,014* 4,440 +11%

EBIT-margin (%) 16.0 17.2 15.3* 16.3

Operating cash flow 2,125 1,890

• 11%

4,547 4,200

• 8%

EPS (SEK)* 2.36 2.93 +24% 6.81 8.03 +18%

*Excluding restructuring and one off charges of 109 MSEK in Q1 3rd Quarter Nine months

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Finance net

Interest net on net debt going down 20% New rules: Earnouts to be discounted

MSEK Jan-Sep 2009 Jan-Sep 2010

Interest net

• 403
• 320

Exchange effects and other Defined benefit pensions Discounted earnouts

Total other

• 74
• 51

n/ a

• 125
• 14
• 111
• 34
• 159

Total

• 5 2 8
• 4 7 9

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P&L – Components as % of sales

Q3 Year-on-Year Direct material 33.0% 35.0% Conversion costs 26.9% 24.4% Gross Margin 40.1% 40.6% S, G & A 24.1% 23.4% EBIT 16.0% 17.2% 2 0 0 9 2 0 1 0

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Bridge Analysis – Jul-Sep 2010

MSEK

2009 Jul-Sep Acq/ Div Currency Organic 2010 Jul-Sep

10%

• 3%

6% 13%

Revenues

8,405 798

• 216
• 28

12.8% 488 184 37.7% 9,474

EBIT

1,346 127 1,630

%

16.0% 16.0% 17.2%

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Operating cash flow, MSEK

500 1 000 1 500 2 000 2005 2006 2007 2008 2009 2010 Quarter 3 000 3 500 4 000 4 500 5 000 5 500 6 000 6 500 7 000 7 500 12-months Quarter Rolling 12-months

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Gearing % and net debt MSEK

2 000 4 000 6 000 8 000 10 000 12 000 14 000 16 000 2005 2006 2007 2008 2009 2010 Net Debt 20 40 60 80 100 120 Gearing Net debt Gearing

Debt/ Equity 5 5 ( 6 7 ) Debt/ Equity 5 5 ( 6 7 )

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Q3 Report 2010

Johan Molin President & CEO

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Conclusions Q3 2010

• 6% organic growth and 16% total growth in Q3
• Many new exciting products
• Margin expansion in all parts
• Strong cash flow
• Good activity on acquisitions with ActivIdentity and Agta

Record

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Outlook

Long Term

• Organic sales growth is expected to continue at a

good rate

• The operating margin (EBIT) and operating cash flow

are expected to develop well Outlook for 2 0 1 0

• Organic growth is expected to be slightly positive

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Q&A